Architectural firms are facing a slowdown in local billings, with many citing broader economic challenges in the commercial real estate market.
Billings for the 26 largest firms on this year’s list were $533.7 million for the 12-month period ended June 30, down about 3% from last year’s figure of $550.3 million. This decline comes after two years of growth firms saw as they recovered from the pandemic. Companywide, however, billings increased 5.7% to $1.9 billion.
The number of licensed architects increased 1.7% to 429 while their employee size fell 2.2% to 2,679.
It’s been a difficult year for some firms that have had to grapple with inflation coupled with higher interest rates.
“We’re seeing delays in construction starting because money’s just a little tighter right now,” AO Managing Partner Rob Budetti told the Business Journal.
The Orange-based firm retained its top spot despite declining 8% to $77.1 million.
Budetti said some firms are hedging their bets by getting a project ready and titled with the hope that the market will improve by the time the project gets going.
While things on the construction side may have slowed down, Budetti said that AO has still kept busy on the long-term planning side. One of its latest projects, Boardwalk at Bricktown, just overcame a major hurdle by receiving approval from Oklahoma City for the 1,907-foot Legends Tower. (see more, page 1).
Declines
Irvine-based Ware Malcomb experienced the largest decrease among the firms, slipping down to No. 3.
Its OC billings dropped 23% to $56.7 million compared to a 16% decline to $73.4 million a year ago.
Ware Malcomb has been making investments in artificial intelligence, service expansion and overall enhancements to the business to help drive long-term growth, Chief Executive Ken Wink told the Business Journal.
“We are taking this opportunity to invest in ourselves and improve our business processes, so we finish this year even stronger,” Wink said.
Wink said that the firm expects to see positive impacts in the quarters ahead, given recent contracts awarded to Ware Malcomb within the multifamily, industrial, retail and science and technology sectors.
Growers
Not all the firms on the list decreased in billings.
LPA Inc. in Irvine moved up one spot to No. 2 on the list by increasing 8% to $76.5 million in local billings.
“We’ve been able to grow in a challenging market by concentrating on doing more with less and taking an integrated, research-driven approach to helping clients achieve their goals,” Chief Executive Wendy Rogers told the Business Journal.
LPA said it reported a double-digit year-over-year increase in its project backlog, including the expansion of Sage Hill High School and nonprofit Pretend City at Great Park.
The firm completed designing Edwards Lifesciences Corp.’s (NYSE: EW) expansion of its Irvine campus. It’s the latest project in LPA’s 12-year collaboration with the medical device maker, Rogers said.
Edwards spent $240 million on expanding its 469,000-square-foot headquarters to include a two-story entry pavilion and two office and lab buildings, as well as a two-story dining facility.
The firm also started work on the $1.2 billion expansion of Hoag Memorial Hospital Presbyterian’s Sun Family Campus, which held a topping off ceremony in June for the first of six new buildings to be built in the campus.
Seattle-based MG2, which has an office in Irvine, also experienced growth in billings, having increased 15% to $9.2 million.
The firm has seen an uptick in retail, industrial and affordable housing markets, according to chief executive officer Mitch Smith.
“The growth in all three of these sectors has had a substantial impact on architectural billings in our Irvine office, reflecting the adaptability and agility of our team,” Smith said. n
The Business Journal’s Raymond Dinh contributed to this article.
